High street sales are falling at their fastest rate since the height of the recession in 2009 as struggling households put the brakes on spending, according to a survey that is a grim omen for struggling retailers this Christmas.
The CBI’s closely watched survey recorded a “steep drop” in retail sales in October. The slump sent shockwaves through the high street, with the CBI’s chief economist, Rain Newton-Smith, warning of a “softening” of demand as inflation ate into Britons’ spending power. Department stores and specialist food and drink outlets bore the brunt of the spending slowdown.
“It’s clear retailers are beginning to really feel the pinch from higher inflation,” said Newton-Smith. “While retail sales can be volatile from month to month, the steep drop in sales in October echoes other recent data pointing to a marked softening in consumer demand.”
The bleak snapshot of high street trading provided by the CBI – which also reported that orders placed with suppliers had dropped at the fastest rate since the spring of 2009 – came as Asda’s income tracker documented a slump in the spending power of average households.
Kay Neufeld, an economist at the Cebr consultancy, which conducted the supermarket study, said: “We have seen family spending power decline in five out of the last six months, underlining the mounting pressures on households’ budgets.”
London was the winner in the race for higher disposable incomes, Neufeld said, after household income in the capital rose by 2.4% compared with a national fall of 0.5%. But in all regions, incomes failed to rise by more than the current inflation rate of 3%.
The findings chimed with official figures for the year to April 2017 that showed London’s income growth outstripping other regions, although the biggest gains were in inner London boroughs. Wages in outer London suburbs increased by 1.2%, compared with 4.4% in the centre of the city, according to data from the Office for National Statistics.
The east Midlands and East Anglia were the only other regions where wages increased by more than the inflation rate in April, which stood at 2.6%.